| Joint ventures with Chinese companies offer one of | | | | In an EJV the division of profits has to take place |
| the most effective ways for western companies to | | | | equivalent to the ratio of the capital contributions made |
| tap the massive China market. In a sino-foreign joint | | | | by the parties, while the profit division in a CJV can |
| venture, the Chinese company usually brings the labour, | | | | take place according to the parties' wishes. A CJV is |
| land use rights and factory buildings, while the foreign | | | | thus a lot more flexible than an EJV. |
| company delivers the necessary technology and key | | | | In a CJV a party may, besides contributing registered |
| equipment, as well as the capital. If the joint venture is | | | | capital, provide for so-called cooperative conditions, e.g. |
| based on a cooperative contract in which issues like | | | | market access rights. |
| the terms of cooperation, the allocation of earnings, the | | | | Before applying for the establishment of a joint |
| ownership of property upon the termination of the | | | | venture, the following documents have to be at hand: |
| contract, the sharing of risks and losses, etc are laid | | | | The necessary work and resident permits for the legal |
| down, it is called a cooperative joint venture (CJV). | | | | representatives: |
| Whereas a sino-foreign Equity Joint Venture (EJV) is a | | | | The approval and corresponding certificate from |
| limited liability company, the share holdings in which are | | | | various relevant authorities like the Planning Bureau, the |
| usually non-negotiable and cannot be transferred | | | | Public Security Department, the Foreign Economic and |
| without approval from the Chinese government. | | | | Trade Bureau, etc. |
| Investors are restricted from withdrawing registered | | | | The approval from the Industrial and Commercial |
| capital during the life of the equity joint venture | | | | Registration Office to use a certain company name |
| contract. | | | | A report of corporate capital verification issued by a |
| | | | | Chinese public accountant . |
| As the investment regulation and business environment | | | | After all the above documents are obtained, you shall |
| changes in China, less and less foreign investor use | | | | go through the following procedure: |
| joint venture as the investment vehicle. RO and | | | | Firstly, the proposal for the establishment of an EJV |
| WFOE are now most commonly used. | | | | has to be submitted to the relevant examination and |
| JV is fading out because of the practical difficulties in : | | | | ratification authorities. Once the proposal has been |
| - picking the proper China partner | | | | approved work can start on researching the project |
| - management | | | | feasibility. |
| - technology transfer | | | | As soon as the research on the project feasibility has |
| - profit sharing, etc. | | | | been completed, the reports thereon have to be |
| | | | | submitted. Once they are approved, the parties |
| Shenzhen is one of the best choices for doing | | | | involved can start negotiations on the signing of the |
| business in China. Situated in the Pearl River Delta, | | | | legal documents, such as the contract or the articles of |
| Shenzhen is the first Special Economic Zone since | | | | corporation of the company. |
| China carried out reform and open-door policy 30 | | | | As soon as the negotiations are completed |
| years ago. Shenzhen has an area of 1953 square | | | | successfully, the contract and the articles of |
| km’s and a population of more than 10 million. | | | | corporation of the company to be finished have to be |
| Shenzhen is the best city both for living and working in | | | | submitted to the relevant departments of the Ministry |
| China, as well as the fastest growing city in the world. | | | | of Foreign Trade and Economic Cooperation. Once |
| In Shenzhen you can enjoy the sound infrastructure | | | | they have approved the documents, they will issue the |
| and the intensive industrial chain for trading, | | | | Approval Certificate for Enterprises with Foreign |
| manufacturing and value investment. Since Shenzhen | | | | Investment. |
| is bordering Hong Kong, you can also take great | | | | With the issued Approval Certificate, the investors will |
| advantage and opportunity from the “one country, | | | | have to go to the State Administration of Industry and |
| two systems” policy. | | | | Commerce to complete the registration procedure for |
| | | | | the company. |
| There are three primary differences between an EJV | | | | To simplify the establishment of a business in China for |
| and a CJV: | | | | foreign companies, municipalities and provinces have |
| While an EJV is always a legal person, and thus a | | | | established so-called foreign investment service |
| limited liability company, a CJV can be a legal as well | | | | centers, which offer foreign investors a complete |
| as a non-legal person. The latter option means the | | | | service from the first consultation on how to open a |
| partners of the joint venture would be personally liable | | | | company in China to the obtainment of the approval |
| for any losses the company might make in the future. | | | | from the government. |